Turkey's central bank will support a shift to lira currency loans and is supporting all demands for lira liquidity, the bank's deputy governor Erdem Basci told a conference on Wednesday. (UPDATED)
The lira has lost around a quarter of its value against the dollar in recent months as the global financial crisis cut into investors' appetite for risk, hitting emerging markets.
But Turkish banks have been spared the turmoil which has undermined their Western counterparts due to relatively limited exposure to the loans which triggered the crisis.
A shift toward loans in local rather than foreign currencies would also shield it from the risks of borrowers defaulting on mass due to the weakening of the lira -- one source of the recent crisis in another emerging market Hungary.
'There is a shift in bank deposits and loans to Turkish lira and we would welcome and support this,' Basci told the conference.
Limits for banks in the forex deposit market may be raised from the current level of $10.8 billion, he said.
He also said a 'technical rate cut could be brought forward' to bolster lira liquidity in the markets. He gave no further details.
Economists said 'a technical rate cut' means lowering of the Central Bank's lending rate. The bank has been pumping liquidity into the market since May rather than borrowing from the market like it did in the past.
'The lending rate becomes more important than borrowing rate because the Central Bank provides liquidity into the markets. We can see a lending rate cut earlier than 2009,' said Finansbank economist Inan Demir.
The bank last month cut its lending rate to 19.75 percent from 20.25 percent.
The central bank left its key borrowing rate unchanged at 16.75 percent at its October meeting and said further moves would depend largely on global market developments.
Basci said the bank was also very sensitive on the issue of foreign currency reserves and that it was not considering lowering reserve requirements.
Separately, World Bank country director Ulrich Zachau told the same conference that Turkey needed $130 billion in foreign financing in 2009.
Most of Turkey's financing needs stem from debt that needs to be rolled over in the short term, he said, adding that the World Bank sees no problem with rolling over this debt.